Michael Dell: HP’s PC Strategy Change Is a Bad Move

In August, HP stunned the IT world with the announcement that it plans to spin off its PC business and possibly even sell it, which would be a major change in strategy for the company. HP also discontinued the HP TouchPad and sold off the inventory for $99 a piece, and gave up on its mobile platform, webOS, which it acquired with the $1.2 billion acquisition of Palm in April 2011.

Speaking to reporters Wednesday, a day before the company's Dell World conference starts, Dell offered three reasons why HP shouldn’t do it, sending a very clear message to the company and its shareholders.

"It's a growth market," said Dell, estimating that there will be 2 billion PCs in a few years — a 500 million increase from now. He also said a vast majority of PC components go into client devices — 95% of all hard drives, for example. "From a cost standpoint you can have enormous scale," he said.

Finally, Dell said that cutting off the client business makes it less likely for employees of companies that are HP's clients to buy HP products. "We know from our history that there is enormous connection from one device to another," Dell said.

HP keeps repeating that it hasn't yet decided whether it will spin off its Personal Systems Group. "Our leadership is focused on getting this analysis done as quickly and accurately as possible, and we'll communicate it as soon as we can," said the company in a response to Dell's comments.

Still, simply by putting that option on the table, HP has shaken its own foundation to the core, and backing off from the decision now could be just as harmful as staying the course. And all this comes less than a month after a leadership shakeup, with CEO Leo Apotheker forced out and replaced by Meg Whitman, the former eBay CEO.

Dell is not the only one who thinks that spinning off of its PC business would be a bad move for HP. The company has been widely criticized by analysts and media pundits, and the value of the company's shares dropped considerably following the announcement.

However, when the CEO of one of your biggest competitors tells you you're completely off-course, it has to be at least a bit worrisome: both for the company's management and the shareholders.

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